Google Owes You a Dividend

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What's the point, Google (Nasdaq: GOOG  ) ?

You're carrying $33.4 billion in cash and marketable securities on your balance sheet, but it's not as if you're going to use it.

The time is right to initiate a dividend policy. Tacking on yield-chasing income investors to your already smitten growth investors can do wonders for your share price. It's also the right thing to do, because what else are you going to do with all of that money?


Let's go over all of the possible reasons to carry $33.4 billion -- and growing -- around these days.

Buyouts? Fuhgeddaboudit! The antitrust bartender cut you off a round ago. Why else has it taken this long to pull off the $700 million acquisition of ITA Software? Why did Groupon supposedly ask for a stiff breakup fee before that potential purchase went bust?

Share repurchases? Please. There's too much pride among the tech dot-com giants these days to buy back stock. Repurchasing shares will likely lead to a lower market cap. There are bragging rights in there, and the world's leading search engine is going to hack away there when it's a good year or two away from passing Microsoft (Nasdaq: MSFT  ) in terms of market cap.

Cushion? Google isn't cyclical. This isn't Ford (NYSE: F  ) , that needs a sizeable cash mattress to get it through the lulls of auto demand. Google even grew during the recession. If it ever begins to consistently lose money, there will be bigger problems here than simply cash management.

Interest income? That's a laugher. You're earning a pittance on your idle cash.

The only possible use for that meaty war chest is if you need to ramp up your R&D spending to drum up organic solutions to the acquisition targets that the antitrust regulators will no longer let you buy. Either way, no one can dream away $33.4 billion in projects.

I realize that no one is buying into the search industry for quarterly distributions. Smaller rivals Yahoo! and Baidu (Nasdaq: BIDU  ) aren't returning money to their shareholders through dividend payments. However, those companies do have needle-moving acquisitions that they can pull off. They also have a lot less cash than you do.

It's time. I'm not much of a cheerleader when it comes to dividend policies in general. I'd rather see a company do something with its money than hand it back to me in a taxable transaction. However, your situation is very different, Google. That $33.4 billion isn't going anywhere -- unless you want it to happen.

Should Google initiate a dividend policy? Share your thoughts in the comment box below.

Google and Microsoft are Motley Fool Inside Value picks. Baidu and Google are Motley Fool Rule Breakers choices. Ford Motor is a Motley Fool Stock Advisor selection. Motley Fool Options has recommended a diagonal call position on Microsoft. The Fool owns shares of Google and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

Longtime Fool contributor Rick Munarriz still uses Google a lot in his daily life. He does not own shares in any of the companies in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

Read/Post Comments (8) | Recommend This Article (9)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On December 13, 2010, at 3:32 PM, lctycoon wrote:

    Would you say the same thing about Apple, Microsoft, Cisco? Although MSFT and CSCO are returning money to stockholders now.

  • Report this Comment On December 13, 2010, at 3:54 PM, TMFBreakerRick wrote:

    The difference between Google and those three is that they can probably get away with their acquisitions. No one flinched when Cisco bought Pure Digital (Flip) and Microsoft was able to get away with a bigger dot-com deal (aQuantive) than Google (DoubleClick) sooner. As long as Apple's buyouts would be computing or web-based related -- and not large rivals in smartphones or MP3 players -- it wouldn't be a problem. All three could acquire Groupon in a blink of a regulator's eye -- Google cannot. Apple and Cisco in particular have had their cyclical mood swings in the past, unlike Google.

  • Report this Comment On December 13, 2010, at 3:56 PM, lctycoon wrote:

    But all three of them have well north of $30 billion in cash. I'm wondering just what they would want to buy with that? 10% of ExxonMobil?

  • Report this Comment On December 13, 2010, at 4:05 PM, exeter17 wrote:

    Well since the investment definition of a stock value is the NPMV of all future dividends - APPL and GOOG are worthless until they pay a dividend.

    Now, if you buy the stock hoping it will triple that's more speculation/gambling than "investing"

  • Report this Comment On December 13, 2010, at 5:32 PM, HectorLemans wrote:

    "The only possible use for that meaty war chest is if you need to ramp up your R&D spending to drum up organic solutions to the acquisition targets that the antitrust regulators will no longer let you buy."

    As a shareholder of Google, this is exactly what I'd like to see them do. I was furious hearing they offered Groupon $6 billion. Are you kidding me!!! Come on Google, hire some more super-smart programmers and make your own "Groupon". It's not that hard to replicate compared to stuff you already do (Google docs is awesome)

  • Report this Comment On December 14, 2010, at 12:26 AM, ikkyu2 wrote:

    I was just reading Peter Lynch on this topic - huge cash piles. He subscribed to what he called the bladder theory of cash hoards: the more cash a company has, the greater the temptation to .. umm.. "p" it away.

    I tend to think it's about time that GOOG and AAPL returned a little bit of free cash to their shareholders.

  • Report this Comment On December 14, 2010, at 12:37 AM, Mstinterestinman wrote:

    I agree I am starting to buy less Non Dividend payers I only hold four I think. GMCR,EBIX,MCF,DAR

  • Report this Comment On December 14, 2010, at 1:41 PM, teddipoo8699 wrote:

    Google is the personification of Greed ...... let 'ëm eat cake does not matter to them whether I use Gooogle or not......but what would happen if we all stopped using google for the year 2011. Woudl they care ...I doubt it. Too Bad we can't get even with them...... There are other search engines, just as good.....What if ????

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